Carmel Group Response to SSG
April 6, 2007
Carmel Group Follow-UpBefore getting into the issues regarding the Carmel Report, and the list of questions I posed to them, I would like to make a few statements:
Jimmy Schaeffler is indeed a Stand-Up guy. He was kind enough to speak to me the first time I called, Kind enough to agree to discuss the Report, and kind enough to discuss the questions I posed to him. This to me represents someone who has the courage to stand up and discuss things in a reasonable way.
He was passionate about his opinion, but also receptive to hearing the other side of the debate, and he fully recognizes that there will be opinions that differ.
He does not hate satellite radio……quite to the contrary loves the medium.
That being said, I can report that while he did not go through my list of questions point by point, he was very willing to discuss the report, the merger, and where the competitive landscape rests. I spent over half an hour on the phone with him, and the conversation was enlightening, and intriguing. He expressed that since the report has been issued, he has been very busy, and that while he would love to answer the SSG questions point by point, that he simply can not do that at this time, but was eager to express his answers on a general basis. I found that to be quite fair.
IS IT A BIASED REPORT?
Jimmy pulls no punches here. He states that it is indeed a biased report, in the sense that it presents a particular position . He states that the cover page of the report is indicative of that fact, and his report took a stance of being against the merger. Jimmy was not making an effort to write a report that considered each and every side of the debate. His report was not offered as a "balanced" report. It was an report outlining why he felt the merger should not be allowed.
Some in the world of the internet have accused that the report is bought and paid for by the NAB, and thus Carmel report should be discounted as a paid report. I will say, that the man has passion, and I believe, based on my interactions with him that he truly feels the things that he issued in his report. At one point he stated, “Do I sound like I am biased in my heart, I am pointing out that I believe competition is a good thing. I am not anti satellite radio, I love the service. I want the competition between these companies to remain.”
MEREGE OR NO MERGE
Jimmy believes that the competition in satellite radio is healthy. He cited that cash on hand was nearly a billion dollars. I did not debate this issue with him. While there is substantial cash on hand, there are also substantial costs. People who follow this sector know full well how much money these companies are spending.
Jimmy, points out that it is his opinion that the proposed merger is happening to early. It is his opinion that the competitive landscape is not established enough at this point to be seen as true competition. Again, he recognized that I disagreed with that, but stood by his position offering the argument about penetration of I-pod, cells, and internet radios in cars. I did speak to him about the fact that satellite radios installed in cars is subsidized, and that there are costs that go into getting into that platform. He accepted that point, but remained of the opinion that the penetration of some forms of audio entertainment simply are not yet well developed in a car. In my opinion, there are many aftermarket solutions to integrate I-Pods, MP3, etc. into the cars. From a business standpoint, how realistic is it for Toshiba to subsidize an installation across vehicle platforms? It is less expensive, and better to simply allow the aftermarket companies to do that work.
CONFLICTING REPORTSWe did discuss the issue regarding what many are calling conflicting opinions between the current report, and a report issued earlier.
Jimmy states that he was consistent in his opinions in both papers, and points out two key elements that illustrate this:
1) satellite radio is different (and thus its wonder)
2) satellite radio is not yet a substitutable competitive product (vs. the other digital audio services and devices Sirius and XM are noting).
What he is indicating, and in particular in the automotive aspect of the competitive landscape, is that there is enough separation between the various hardware and content offerings that satellite radio has a uniqueness. Secondly, it is his opinion that most of the other competitors are not yet ready fro “prime-time” yet, and until that time, they are not viable substitutes.
Again, he is taking a specific position, but is well aware that there is another side to the debate.
CONTENT
Jimmy feels very strongly that a merged company would create problems for content and content providers. He cited a niche channel such as XM’s Dylan in an example. Dylan had the option of negotiating with two companies. XM and Sirius. There is nothing like that type of program on terrestrial radio. I did point that content on terrestrial radio is syndicated all the time, but he feels that a program such as dylans is to specialized to be viable in that medium. We will have to agree to disagree. His point was that content providers, such as Dylan, Stern, etc. would in effect lose one company to negotiate with, and thus will not be able to obtain the best deal.
Realistically, this boils down to business models. If Dylan is a screaming success on satellite, there is no reason it couldn’t be replicated and succeed on terrestrial. It is a matter of programming stations to meet consumer demand.
In summary, Jimmy Schaeffler is someone who is not anti satellite. Contrary to what some may feel, he wants to see these companies succeed as individual companies. He feels that the consumer will get the short end of the stick, and that this merger is about shareholder value rather than consumer value. He feels that the FCC and DOJ do not want to b e in the business of being merger police, and that in the end, pricing controls are not likely to work. I pointed out the pricing concessions proposed by Sirius and XM, and he acknowledged that.
In my opinion what we have is a report that outlines a specific side of an issue, written by a man that fully recognizes that there is another side to the debate, and further is willing to discuss the full spectrum of the issues.
In the end, it is clear that there are simply aspects that we simply agree to disagree about.
The charge of the DOJ and FCC is to consider all sides of these issues. These entities will see the Carmel report as well as many others. They will not consider these reports in a vacuum, but rather as opinions taking differing sides of the issue. In the end, these government agencies will weigh out the various opinions and arrive at a conclusion.
Is Jimmy Schaeffler anti satellite radio. NO
Does he have an opinion about the merger. YES
Does he recognize that there is another side to the story? YES
Some readers will agree with the Carmel Report……Others will disagree. One thing we know is that it is one opinion, along with many others, that will be included in the hearings and considered. Investors in this sector need to try to look, as objectively as possible, at information such as this, and consider not whether or not you agree with the Carmel report, but whether you think that those making the decisions will agree.
I fully recommend that SSG readers let their own opinions be known to the FCC and DOJ. Give these entities as much information to consider as possible.
The report from Carmel can be referred to
HERE
In closing, while some readers were critical of me terming Jimmy Schaeffler as a Stand-Up guy, I would like to reiterate that he is indeed a Stand-Up guy. He has an opinion, he expressed it, he offered what he feels is a compelling argument to support his position. Similarly, I have an opinion, I expressed it, and readers can see throughout SSG compelling arguments for my stance. It is my hope that readers find value in this article.
Labels: carmel report, jimmy schaeffler, merger, sirius, xm
4/06/2007 02:45:00 PM
SSG Has Merged. You Can Read All Of The Latest SSG Content By Clicking Here
4 Comments:
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Now MP3 players and internet radio aren't mature enough to be competitors? SURE! LOL
1. Over 100 million MP3 players have been sold.
2. Internet radio has more listeners than satellite radio. Millions more.
By , at April 06, 2007 4:35 PM
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While I will stop short of calling Mr Jimmy a "stand up guy", I will say the interview that SSG provided was unbiased, clear, concise and informational. In the end this is all you can ask for when gathering info in order to make an important decision....nice job SSG!
By , at April 07, 2007 4:52 AM
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boy i hope the satellite radio industry begins to place this fight in the proper context for the public..
this merger must be about something much larger then just satellite radio service..?
By , at April 07, 2007 7:48 AM
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Jimmy's full of horse sh!!
By , at April 07, 2007 8:09 AM
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